Bank of Ghana to auction $120 million to help stabilise cedi

The Bank of Ghana (BoG) has announced plans to release some $120 million onto the market for the first quarter of this year as part of the Central Bank’s plan to help stabilise the cedi.

The auction which will be restricted to licensed foreign exchange dealing banks will see the regulator, auction $40 million in January, February and March this year, totalling $120 million.

The Central Bank in November announced that it will be auctioning part of the $2 billion, cocoa loan syndication to help stabilize the cedis.
The regulator is optimistic this intervention together with other regulatory measures will help stabilize the local currency.

It has already released about $80 million to some commercial banks in the last quarter of 2016.
Some analyst says the intervention helped to reduce the cedi rate of depreciation which was very sharp in December 2016. However, this latest intervention has been met with mixed reactions.

Whiles some believe it’s a prudent decision to halt the cedi’s rate of depreciation, other think is not sustainable.
Economist Ishmael Yamson in an interview with JOYBUSINESS said he believes this could rather fuel activities of speculators.

He adds that it would rather worsen the situation, this is because this s intervention will not help lessen demand for dollars, which been a major program for the economy.

"Clearly it is inadequate and unsustainable. It would just whet appetite on the market and would actually help in deteriorating the situation further," he said.
He said although the supply side can help slow the rate of depreciation, he quizzes "for how are they going to continue to do that? When the $120 million runs out what happens?

"If you have not reduced the demand since this is a supply issue, which is out of balance with the demand...maybe a new government would be fighting to see the cedi slide but it is not their fault," he noted.

According to him, the fundamentals are very weak and every industry players know that the demand over the next three months is much higher than the $120 million.
Regarding how the pricing of dollars going to be determined he questioned "are you going to sell the dollar cheaper so that you would make people happy? I don't think this is a sustainable policy at all."

But Chairman of shipping and logistics group McDan, Daniel Mckorley tells JOYBUSINESS they will rather want the Bank of Ghana to release more dollars onto the market.

This, he said is because what the regulator is planning to release will only go to multinational companies in the country and not the local firms.
"The amount is woefully inadequate and cannot solve the problem...in the forex bureaux, multinationals companies are struggling with local companies and traders to buy dollars off the street," which Mr Mckorley said is bad.
He noted that all the banks are reserving their dollars for the multinational's companies which are problematic for the local business people.

"I don't see anything wrong with injecting dollars into the market. My problem is the amount of $40 million every month is woefully inadequate for the business community," the McDan boss said.

The cedi is likely to be sold to you at GH¢4.30 by any commercial bank, however, UK-based Economist Intelligence Unit (EIU) had forecasted that the challenge with the local currency could be over in February.